Paring early gains, the rupee on Friday recovered to 54.17 against the dollar on increased foreign fund flows into the market on account of bond auction.
Stronger FII inflows due to the government bond auction helped capital inflows into the market.
The Indian unit had depreciated sharply to close at 54.48 on Thursday after currency traders remained cautious ahead of the Union Budget due on February 28.
On Friday, it opened marginally lower against the dollar at 54.51 on the Interbank Foreign Exchange Market due to a weaker euro and global equity markets. The euro had slumped to a six-week low against the American currency on uncertainty ahead of Italy's election at the weekend.
Call rate eases; G-Secs up
The interbank call money rates closed at 7.80 per cent from a close of 8 per cent.
The 8.15 per cent government security, which matures in 2022, ended higher at Rs 102.27 from its previous close of Rs 102.19 on Thursday, while yields were lower at 7.79 per cent from 7.81 per cent.